Waiting to make up lost revenue in April

by Tom Chorneau

(Calif.) February tax collections came in modestly ahead of projections made just weeks before by Gov. Gavin Newsom in his proposed budget, but overall revenues remain close to $2.2 billion below estimates.

The forecast for personal income tax revenue last month was just over $3 billion, with actual collections falling $137 million short, according to the governor’s Department of Finance.

Sales taxes, however, came in a bit higher than expected—generating $2.6 billion, which was $152 million more than estimates.

The state received $264 million in corporate taxes—more than double the $162 million that had been expected.

February is generally not an important month for the tax collector, although changes in the federal tax code continue to create surprises.

Indeed, the state’s fiscal outlook continues to be dominated by the $2.8 billion slip in revenues collected in January—almost all of it the result of a slide in personal income taxes paid that month.

There is some evidence that the state is likely to recover those missing dollars in April when the largest share of taxes are paid.

Administration officials have said that last year, as a result of changes in the federal tax code, many big investors chose to pay the lion’s share of what they owed the state before the end of the 2017 calendar year. That incentive was no longer in play as 2018 closed and, thus, there is an expectations that the state will catch back up next month.

Meanwhile, the California economy continues to chug along at impressive levels.

Unemployment remains close to historic lows, although the actual number ticked up 0.1 percent to 4.2 percent. That’s slightly higher than the national average of 3.9 percent, according to a memo from the Department of Finance.

Participation in the labor force, however, reached 62.5 percent—the highest level since September, 2013. The average monthly job gain was 23,700 in 2018, and 30,500 in 2017.

Of the state’s 11 biggest employment categories, nine added jobs last year and just two lost positions: